All financial crisis pay cuts for civil servants to be reinstated as of January 1

As of January 1, all salary cuts instituted in the public sector back in 2012 will be completely phased out, and this – in conjunction with an anticipated rise in the cost of living allowance – is expected to inflate the government payroll.

In late 2012, as part of a preliminary deal between Cyprus and international lenders, parliament passed a series of laws slashing salaries and benefits for people employed in the broader public sector.

The salary reductions began being rolled back in July 2018, and were implemented in stages every January 1 of each year. The final stage in phasing out the cuts comes into force on January 1 of 2023 – at which date civil servants will recover all the salary reductions imposed since 2012. This concerns some 86,000 public-sector employees.

As of next year, the rollback of salary cuts will mainly affect people on salaries over €2,000. In previous years, the earnings of people on lower salary brackets had been restored.

Between 2018 and January 1, 2023 an estimated €265 million will have been ‘returned’ to public-sector workers.

Government payroll in 2023 will rise to €3.19 billion from €3.04 billion this year – an increase of 4.7 per cent. This covers salaries, pension payouts and bonuses.

Other than the phasing out of the salary cuts, the payroll will rise because of a higher cost of living allowance (CoLA) as well as the resumption of statutory pay increments.

Although the exact figure for CoLA for 2023 has yet to be set, it’s expected to be substantial. The CoLA rate paid out for 2022 was 1.27 per cent. However, with the annualised inflation rate for 2022 expected to settle at around 7.7 per cent, CoLA for 2023 could double or even triple that.

The payment of CoLA resumed in January 2018, after having been frozen since July 2011. Under an agreement between the finance ministry and stakeholders, CoLA is paid once a year (in January) provided that the second and third quarters of the prior fiscal year registered GDP growth.

The CoLA rate is limited to half the annual rise in the Consumer Price Index. Trade unions want a new deal raising it to 100 per cent of the CPI. Employers want CoLA scrapped.

In the private sector meanwhile, not everyone receives CoLA – only those who work in professions governed by collective agreements.

In addition, few if any private-sector workers will receive pay increments, nor will they see their salaries reinstated to 2013 levels.